Gulf airlines win support of Europe’s airports, travel bodies in subsidies row

The three major Gulf carriers have won the support of Europe’s airports and tourism boards in the ongoing row over subsidies, it was revealed at the weekend.

Gulf airlines win support of Europe’s airports, travel bodies in subsidies row

The three major Gulf carriers have won the support of Europe’s airports and tourism boards in the ongoing row over subsidies, it was revealed at the weekend.

Three major US carriers – consisting of Delta Airlines, American and United Airlines – have repeatedly claimed Emirates Airline, Etihad Airways and Qatar Airways have received $42 billion of subsidies from the governments of Qatar and the United Arab Emirates. The American airlines claim this support distorts the marketplace and undermining fair competition, a stance which has been supported by European rivals, mainly Air France-KLM and Lufthansa.

However, a new report commissioned by the European Travel Commission (ETC) and the Airports Council International (ACI)-Europe and unveiled at a recent event in Prague supports the fast-paced growth witnessed by the Gulf carriers and claims the support the three airlines receive from their governments is a “legitimate economic development policy.”

Arnaud Feist, president of ACI Europe and CEO of Brussels Airport, said at the ACI’s recent congress: “The European airlines attacking their Gulf competitors are our long-time partners. For many of us, their fate is also our fate. They are right in saying that the expansion of these airlines is a fierce challenge for European aviation. But the issues they are raising in this context and the remedies they are proposing are the wrong ones.

“Open Skies and fair competition need to go hand in hand. But Europe’s airports and Tourism Organizations do not regard the public financing of airport infrastructure, start-up aid for airlines and more favorable fiscal regimes as necessarily involving unfair competition – but rather as legitimate economic development policy choices, made by the Gulf States,” he stated.

Eduardo Santander, executive director of the ETC, said the increased connectivity brought by the growth of Middle East carriers in Europe was good the European economy.

“Connectivity goes beyond Open Skies. The EU’s new Aviation Strategy should address a range of issues, such as more liberal and tourist-friendly visa policies, enhancing airport capacity, abolishing aviation taxes, reducing regulatory driven costs and implementing the Single European Sky. In the future, the major growth in tourism arrivals will arrive from the emerging source markets located outside Europe, and a good aviation strategy will be an important prerequisite to keep Europe world’s number 1 tourist destination,” Santander added.

He said the emergence of the three main Gulf carrier had helped Europe’s tourism sector cope with the industry slow down after the 2008-2009 global crisis.

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Despite the support shown by the airports and travel bodies, Lufthansa Group, the largest European aviation group, said earlier this month the US and EU must collectively resolve the subsidies row, which it says is effectively a trade dispute.

The group, which is comprised of Lufthansa German Airlines, Austrian Airlines, Swiss International Air Lines, Germanwings, Eurowings, Cityline and Lufthansa Cargo, outlined its concerns to US officials over the “unprecedented growth of the three Gulf carriers” in the EU and US markets, which he says has exceeded normal patterns.

Thomas Kropp, senior vice president head of group international relations and government affairs at Lufthansa Group, in a letter to the US Department of Commerce, US Department of State and the US Department of Transport, said the growth of Etihad Airways, Emirates and Qatar Airways was six times that of the European airlines.

“The capacity growth of the Gulf carriers is far higher than what all other international carriers are able to accomplish in the market. In the case of Europe, average annual growth in seats between 2004 and 2014 was 16.5 percent for the Gulf carriers (EK/EY/QR) and only 2.7 percent for all other European airlines,” said Kropp in his letter on subsidies to carriers from the Gulf and the impact on airlines of the Lufthansa Group.

The “excessive capacity” had led to a shift in traffic flows, with “80 percent of passengers occupying seats in an aircraft of the Gulf carriers are flying beyond the Gulf hubs to destinations in Asia and Africa,” the letter claimed, citing data from the European Commission.

The shift in patterns has led to a loss of connectivity at Lufthansa Group’s European hubs at Frankfurt, Munich, Vienna, Zürich and Brussels, he claimed.

“Today about 3.1 million passengers travel from and to Germany through the hubs in the Gulf instead of using direct services of German, Asian and African airlines,” said Klopp, who said that the airlines of the Lufthansa Group are “unable to fairly compete for the growth” in Asia and Africa.

“The controversy should be reduced to what it actually is: a trade dispute. Both the US and EU have trade experts who are experienced with the multilaterally-agreed subsidy rules of the WTO, and they should be called upon to determine whether the financial support granted to the Gulf carriers amounts to subsidies as defined in the context of WTO agreements,” he added.

The chief executive of Delta Airlines, this month again lashed out at the Gulf carriers, claiming they are “not airlines, they’re governments”.

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